Holmes Cleaning Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations: Events Affecting Year 1: 1. Provided $120,000 of cleaning services on account. 2. Collected $90,000 cash from accounts receivable. 3. Paid salaries of $40,000 for the year. 4. Adjusted the accounts to reflect management's expectations that uncollectible accounts expense would be $2,000. The expense was determined using the percent of revenue method. Required a. Organize the transaction data in accounts under an accounting equation. b. Prepare an income statement, a balance sheet, and a statement of cash flows for Year 1.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
As per double entry system of accounting, for every transaction atleast one account should be debited and atleast one account should be credited. It will make accounting equation equal all the times:
Assets = Liabilities + Equity
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
